Exhibit
10.1

      


      2009
Executive Officer Bonus Plan


      


      Objective:

       

      
        	
                 
      

              	
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                Align
      the interests of employees and shareholders in the future growth and
      success of ArthroCare Corporation (the “Company”) by rewarding employee
      performance.

              


      

       

      
        Bonus
Pool:

      

       

      
        	
                 
      

              	
                -

              	
                Up
      to 100% of the Total Bonus Potential of all Eligible Participants during
      the period of January 1, 2009 through December 31, 2009 (the “Bonus
      Period”).  The Total Bonus Potential for an Eligible Participant
      (other than the Company’s CEO) with a base salary of $200,000 shall be
      $120,000.  The Total Bonus Potential of an Eligible Participant,
      other than the Chief Executive Officer, may be increased or decreased at
      the sole discretion of the Chief Executive Officer of the
      Company.  The Total Bonus Potential of the Chief Executive
      Officer may be increased or decreased at the sole discretion of the
      Company’s Board of Directors.

              


      

       

      
        Eligible
Participants:

      

       

      
        	
                 
      

              	
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                All
      executive officers of the Company from the period of January 1, 2009
      through the payment date of a bonus (the “Bonus Payment Date”) who began
      employment with the Company on or before December 31, 2009, other than
      those employees who are ineligible due to performance issues, as approved
      by the Compensation Committee of the Company’s Board of Directors.  Executive officers
      must be employed on the bonus payment date to be eligible for any
      payment.  Pro rata eligibility for executive officers who start
      after January 1, 2009 and remain employed by the Company through the Bonus
      Payment Date.  Executive officers who go on leave of absence
      will have their bonus prorated for time worked through the Bonus Payment
      Date.

              


      

       

      
        Bonus
Potential:

      

       

      
        	
                 
      

              	
                -

              	
                60%
      of base salary for fiscal year end December 31, 2009 for Vice Presidents
      who are executive officers of the
Company.

              


      

       

      
        	
                 
      

              	
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                75%
      of base salary for fiscal year end December 31, 2009 for the Chief
      Executive Officer.

              


      

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        Bonus
Factors:

      

       

      
        	
                 
      

              	
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                In
      the event the Company achieves at least 85% (the “Minimum Achievement
      Level”) of the Net Product Revenue Goal and the Cash Management Goal, a
      bonus will be earned by each Eligible Participant.  The Net
      Product Revenue Goal shall be as set forth in the Company’s sales forecast
      for the full year of 2009 and the Cash Management Goal will be as approved
      by the Board of Directors for the period of January 1, 2009 through
      December 31, 2009.

              


      

       

      
        	
                 
      

              	
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                The
      Net Product Revenue Goal and the Cash Management Goal shall be ascribed a
      percentage weight totaling 100% in the aggregate, as
    follows:

              


      

       

      
        	
                 
      

              	
                Net
      Product Revenue Goal – 60% weight

              


      

       

      
        	
                 
      

              	
                Cash
      Management Goal – 40% weight

              


      

       

      
        	
                 
      

              	
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                The
      Minimum Achievement Level is determined by adding the weighted average of
      the full year Net Product Revenue Goal (i.e., Net Product Revenue Goal
      Achieved (as defined below) multiplied by 60%), plus the weighted average
      of the Cash Management Goal (same formula).  If the sum of these
      percentages is equal to or greater than 85%, a bonus is
      payable.

              


      

       

      
        	
                 
      

              	
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                If
      the Bonus Achievement Level is between 85% and 100%, then Eligible
      Participants are eligible for a prorated bonus equal to a 1 to 3 ratio of
      the bonus achieved.  For example, if the Bonus Achievement Level
      is 85%, then Eligible Participants are eligible for 55% of their Total
      Bonus Potential.

              


      

       

      
        Bonus
Multiplier:

      

       

      
        	
                 
      

              	
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                If
      the Bonus Achievement Level is in excess of 100%, then Eligible
      Participants are eligible for 100% of their Total Bonus Potential, plus a
      percentage of their Total Bonus Potential equal to three times the portion
      in excess of 100%.  For example, if the Bonus Achievement Level
      is 110%, then Eligible Participants are eligible for 100% of their Total
      Target Bonus Potential, plus 30% of the Total Target Bonus
      Potential.  The Bonus Achievement Level maximum is 115% and the
      maximum Total Bonus Potential is
145%.

              


      

       

      
        Defined
Terms:

      

       

      
        	
                 
      

              	
                Net Product Revenue
      shall mean the amount of ArthroCare total net product revenue from
      the period of January 1, 2009 through December 31,
  2009.

              


      

       

      
        	
                 
      

              	
                Cash Management shall
      mean the management of cash as defined by the Board of Directors for the
      period January 1, 2009 through December 31,
  2009.

              


      

       

      
        	
                 
      

              	
                Net Product Revenue Goal
      Achieved shall mean the percentage determined by dividing the full
      year net product revenue by the Net Product Revenue
  Goal.

              


      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                 
      

              	
                Cash Management Goal Achieved
      shall mean the management of cash achieved as defined by the Board
      of Directors for the period January 1, 2009 through December 31,
      2009.

              


      

       

      
        	
                 
      

              	
                Bonus Achievement Level
      shall mean the actual level of bonus
  achieved.

              


      

       

      Any
bonuses payable under this 2009 Bonus Plan are subject to the approval of the
Company’s Board of Directors.  The Company has the right to make
changes in plan participation, the bonus pool or any other aspect of this plan
at any time and without prior notice.

       

      The
Company must have filed all financial statements required by the Securities and
Exchange Commission and be considered a current filer for any bonuses to be
payable under this Plan.